Why Alibaba Picked AMD For New Cloud Server Chips

Chinese e-commerce giant Alibaba has agreed to use graphics processing chips from Advanced Micro Devices in servers that power its cloud computing services.

The win for AMD comes as the once-struggling chipmaker is on the comeback trail with new chips to compete with Intel and Nvidia. Shares of AMD, which have skyrocketed 126% this year, gained 5% in pre-market trading on Friday.

Alibaba (BABA) will use AMD’s Radeon Pro chips to expand its cloud offerings, AMD said in a release. Though Alibaba’s main focus has been on e-commerce, the company is diversifying. Its cloud subsidiary competes with Amazon Web Services, the Microsoft Azure operation, and many others in the market to offer online storage and software services to corporate customers.

Although Intel (INTC) still dominates the market for chips to power servers in massive cloud data centers, AMD (AMD) and Nvidia (NVDA) are making gains by repurposing graphics processing chips. Once used mainly to power video games and architectural software, graphics chips excel at handling many simple but simultaneous calculations, a trait which is also useful for the kinds of tasks performed by cloud servers.

AMD CEO Lisa Su, an electrical engineer and chip designer who took over the top job two years ago, continues to execute on her plan to revive a company that had been all but obliterated by its larger competitors. Key gains in graphics and video gaming console chips have boosted AMD’s results as well as a savvy deal to license server chip designs in China.

The company’s share price hit bottom at $1.83 in February. In early trading on Friday at $6.80, the shares have nearly quadrupled since that time.